Release Primary Property from SBA 7a Loan

searcher profile

September 22, 2024

by a searcher from Georgia Institute of Technology in Atlanta, GA, USA

Search Funder Community,
I would like to find out if you can remove a personal property from an SBA 7a loan once your business becomes fully collateralized with assets from the balance sheet or do you have to refinance the loan in order to remove the property? Please elaborate on if the value of assets on the balance sheet are liquidated value and do you need an updated appraisal on equipment owned by the business to support this case.

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commentor profile
Reply by a lender
from Eastern Illinois University in 900 E Diehl Rd, Naperville, IL 60563, USA
I would be happy to have a discussion on this topic. Technically speaking a lender does not need to ever release collateral on an SBA 7A loan. However, if you have paid the loan down to a point where it is fully collateralized by hard business assets, then the Bank could chose to release excess collateral. The biggest challenge that exists in getting this done is the advance rates and what the SBA will advance on as hard collateral. The SBA will only count has hard collateral 50% of the book value of equipment / fixed assets, 75% on the appraised value of these assets, 10% on FF&E, 10% on inventory, and nothing on A/R, and 85% on commercial real estate. This means many businesses that are highly leveraged based on goodwill may never be fully collateralized from the SBA perspective, meaning they are likely to want to keep that guarantee in place forever.

As has always been suggested, you could pay down the loan the value that property provides in collateral and then get the lender to release that collateral in exchange for that paydown. You could also look to refinance into a more conventional loan product and get the property released that way.

If you have additional questions on outside collateral, you can reach me here or directly at redacted
commentor profile
Reply by a professional
from The University of Alabama in Birmingham, AL, USA
The lender never has to release collateral, and likely wouldn’t in this case unless you’re adding RE assets to the balance sheet. Certainly dependent on the assets, loan performance, and the specific lender.

The collateral value of equipment is the calculation is 50% net book value on existing, 75% on new equipment, or 80% liquidation value from an appraisal.

If you’re fully secured, the lender *could* drop it.
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